In co-pending U.S. patent application Ser. No. 10/465,296 filed Jun. 19, 2003, the instant inventors disclosed a conceptual process for the electronic settlement of petroleum and gas distributions.
Since the advent of deregulation, the settlement chain for minerals (e.g., crude oil and/or natural gas), from their source in the ground (a/k/a wellhead) to purchasers, has been broken up and now typically involves multiple entities each subject to a myriad of contractual rights, obligations, and regulations.
For example, a landowner (a/k/a owners) contracts, via a lease, with an oil and gas company to drill a well (a/k/a operators) to produce the minerals from the land. The terms of the lease may grant the owner a royalty of ⅛th of the minerals produced each month valued at the highest commercially available price in the area. The operator subsequently enters into a joint operating agreement with two additional oil and gas companies (a/k/a working interest owners) to participate in the development of the well. The joint operating agreement delineates how costs and the volumes of minerals produced will be divided among the companies. The operator and each working interest owner separately contract with marketers to sell the minerals produced to end users (a/k/a purchasers). Further, the operator and each working interest owner separately contract with transporters to deliver their share of the minerals produced to their respective purchaser. Finally, upon completion of each sale of their respective interest in the minerals produced the operator and each working interest owner must pay royalties to the owner. In addition, the operator and working interest owners must pay taxes and file required regulatory reports to various governmental agencies on their share of the minerals produced.
Already with a simple single well scenario and a single landowner, the complexity of the settlement is obvious. The complexity of settlement compounds when one adds multiple owners, multiple wells, multiple entities at each level of the chain, and asset and owner turnover. Further, adding to the complexity is the opaqueness of pricing, transportation and marketing costs, and the imperfect flow of information between entities at each level.
It is inevitable that such complexity will generate disputes. For example see: Andrews, E. L., “As Profits Soar, Companies pay U.S. less for Gas Rights,” New York Times, Jan. 23, 2006.
Accordingly, there is a need for an electronic settlement system for mineral production, distribution and sales.